Can You Invest in BRICS? Here’s How to Get Started

BRICS, an acronym for Brazil, Russia, India, China, and South Africa, is an economic grouping of emerging economies. The alliance expanded in January 2024 to include Egypt, Ethiopia, Iran, and the United Arab Emirates, with Indonesia joining in early 2025. This expanded group encompasses a significant portion of the global population and economic output. Investors often consider these nations for their collective economic significance and growth potential.

Direct and Indirect Investment Pathways

Investors can gain exposure to BRICS economies through several direct and indirect pathways. Indirect methods are often more accessible and convenient.

Exchange-Traded Funds (ETFs)

Exchange-Traded Funds (ETFs) offer a straightforward method for investing in BRICS nations. These funds trade on stock exchanges similar to individual stocks and often track an index focused on a single BRICS country or the entire group. By purchasing shares of a BRICS-focused ETF, investors gain diversified exposure to multiple companies across these emerging markets within a single investment vehicle.

Mutual Funds

Mutual funds offer another indirect pathway to invest in BRICS economies. These funds pool money from numerous investors and are professionally managed to acquire a diversified portfolio of assets, such as stocks or bonds, from BRICS countries. Investors buy units of the mutual fund, owning a portion of its underlying portfolio. Unlike ETFs, mutual fund prices are determined once daily after market close.

American Depositary Receipts (ADRs) and Global Depositary Receipts (GDRs)

American Depositary Receipts (ADRs) and Global Depositary Receipts (GDRs) allow investment in foreign companies without direct trading on their home exchanges. An ADR is a certificate issued by a U.S. bank, representing shares of a foreign company’s stock that trade on U.S. markets. These instruments enable U.S. investors to purchase shares of overseas companies, with dividends typically paid in U.S. dollars. GDRs are similar to ADRs but can be traded on exchanges in multiple international markets.

Direct Stock or Bond Purchases

Direct stock or bond purchases on foreign exchanges are a more involved investment pathway. This method requires investors to buy shares of individual companies listed on BRICS country stock exchanges. While offering direct targeting of specific businesses, this approach involves higher barriers to entry and may necessitate specialized international brokerage accounts.

Key Considerations for BRICS Investments

Making informed decisions about BRICS investments requires understanding various influencing factors. These include economic conditions, regulatory frameworks, and market characteristics unique to these developing nations.

Economic Landscape

The economic landscape within each BRICS nation requires evaluation. Investors should examine individual economic growth trajectories, inflation rates, and prevailing fiscal policies. These factors influence corporate earnings and the overall performance of financial markets.

Political and Regulatory Environments

Political and regulatory environments also play a role in BRICS investments. Political stability, government policies concerning foreign investment, and trade policies impact investment opportunities. Legal frameworks governing business operations and investor protections can differ from more developed markets.

Currency Fluctuations

Currency fluctuations can affect investment returns. Movements in exchange rates between an investor’s home currency and the local currencies of BRICS nations can either enhance or diminish profits. For example, if the U.S. dollar strengthens against a BRICS currency, returns from an investment in that country could be reduced when converted back to dollars. Conversely, a weakening U.S. dollar could increase returns.

Market Dynamics

Market dynamics within emerging economies like the BRICS nations have distinct characteristics. These markets can exhibit higher volatility compared to established markets, leading to more significant price swings. Differences in market liquidity and reporting standards for publicly traded companies also exist.

Diversification

Diversification is a foundational principle in investment management, holding particular relevance for BRICS investments. Spreading investments across different countries and regions, even within the BRICS grouping, helps manage potential concentration. This strategy aims to reduce dependence on the performance of a single market or sector.

Executing Your Investment Strategy

After considering investment pathways and relevant factors, the next step involves executing your investment strategy. This includes selecting a suitable brokerage, funding your account, placing orders, and ongoing portfolio management.

Choosing a brokerage account

Choosing a brokerage account is a primary step, as not all platforms offer access to international markets or the specific investment vehicles desired. Criteria for selection should include the brokerage’s access to BRICS-related ETFs, mutual funds, or ADRs. Fees associated with transactions and international holdings, along with the availability of research tools and customer support, are also important factors. Some domestic brokerages may offer sufficient access for indirect investments, while specialized international brokerages might be necessary for direct foreign stock purchases.

Funding your brokerage account

Funding your brokerage account is the next procedural step to prepare for investing. This typically involves transferring funds from a linked bank account through electronic transfers, wire transfers, or sometimes checks. Brokerages generally provide clear instructions on the available deposit methods and any associated processing times or fees. Ensuring the account is adequately funded is necessary before placing any investment orders.

Placing orders for investments

Placing orders for investments like ETFs, mutual funds, or ADRs is done through the brokerage platform. Investors typically search for the specific ticker symbol or fund name, then specify the number of shares or dollar amount they wish to invest. Order types, such as market orders (executed immediately at the current price) or limit orders (executed at a specified price or better), can be selected depending on the investor’s preference. The platform will then display the estimated cost and allow for confirmation of the trade.

Monitoring and rebalancing your investment portfolio

Monitoring and rebalancing your investment portfolio are ongoing processes after initial investments are made. Regularly reviewing the performance of your BRICS holdings and assessing them against your overall financial goals is advisable. Rebalancing involves adjusting the portfolio’s asset allocation periodically to maintain desired diversification levels, which might entail selling some assets and purchasing others. This practice helps ensure the portfolio remains aligned with your long-term strategy and risk tolerance.